LPG: A Cost Effective And Clean Energy Source

Industry : Conventional Energy    

Liquefied petroleum gas (LPG) has emerged as a significant source for energy use in cooking, and heating & cooling applications. Growing population coupled with increasing the need for portable heat source in industrial facilities and residential establishments have steered its penetration in urban areas. In addition, the ease of access and portability of LPG cylinders has further enhanced its prominence as an eco-friendly substitute to coal, and heating oil in off-grid areas.

Low prices coupled with increasing consumer awareness towards clean energy source have led to its adoption across various regions. According to Petroleum Planning & Analysis Cell of India, LPG demand in auto sector has witnessed a cumulative growth of 4.3% over the past one year. Owing to its lower prices and favorable government initiatives, the country has witnessed over 2 million new household connections.

Surging demand across various end-use sectors has led to revisions in government norms by introducing subsidy schemes and lowering customs duties. Large scale subsidies ensured the protection of domestic prices from global LPG market. This further enhances the distribution network in semi-urban areas as the low-income consumer groups are shifting towards a cleaner alternative to wood and crop residues.

Other major applications that are highly reliant on LPG include autogas, chemical and agriculture sectors. Household demand is anticipated to witness competition from growing petrochemical sector. Although naphtha is a dominant feedstock for downstream chemicals and other oil derivatives, various refiners have adopted mixed feed technique by including LPG in their steam crackers. Major countries in Asia Pacific including China and India have adopted this dual feedstock mechanism. In Europe, petrochemical industry has witnessed increasing cracker margins owing to the maximization of LPG crackers over the past few years.

Such increasing reliance on LPG has led various manufacturers to enhance their refinery capacities and gain a competitive edge over their counterparts. Various factors influence the global production, major being low crude oil prices across the world. Oversupply of crude oil at lower prices has urged third party vendors and industry participants to enhance the utilization of onshore and offshore storage tankers.

Recent announcements by OPEC for maintaining its production targets in 2016 are further expected to impact the oil prices over the short term. This is anticipated to negatively impact the growth rates in production, particularly in the U.S., where unconventional reservoirs have witnessed a sluggish growth over the past few years.

LNG is another major factor that influences the LPG production, particularly in North America and Southeast Asia. Ongoing capacity expansions and favorable reforms on LNG in these regions are anticipated to hamper LPG production over the short term. However, lower product prices coupled with favorable government incentives is anticipated to increase its consumption across various end-use sectors.

Ongoing investments for refinery capacity expansion in the Middle East are anticipated to enhance LPG production in the region. As of 2015, the U.S. emerged as largest exporter, accounting for over 35% of the global exports. Supply and trade continue to grow as a number of production facilities are anticipated to commence their operation over the next two years.

key  In-depth report on global liquefied petroleum gas (lpg) market by Grand View Research:


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